Good afternoon, and thank you, for the introduction. I greatly appreciate this opportunity to discuss the Food and Drug Administration's new regulatory strategies that have two objectives: to protect the health of the American public, and to help advance the progress of an industry whose success is of the greatest importance to our patients, consumers, and the economy.

The FDA was founded 98 years ago following the revelation of grossly unhygienic conditions in the Chicago stockyards. The exposé in Upton Sinclair's book, "The Jungle," made the American public so deeply concerned about the quality of food on the market that Congress felt the need to respond. It passed the Food and Drugs Act, which made the federal government responsible for ensuring the high quality of food and other essential products.

The objective of the law was not only to protect the physical health of American consumers, but also to help safeguard their peace of mind about the quality of products that are vital for human well-being and survival. Congress acted in recognition that peace of mind is an essential precondition for high quality of life, for civic order, and for a well-functioning democracy.

At the FDA, we are repeatedly reminded how essential the availability of medical products is for this peace of mind.

As long as American consumers can take it for granted, they go about their daily pursuits and we rarely hear from them. But when some unforeseen development affects this confidence -- I am thinking about the recent flu vaccine shortage, the withdrawal of Vioxx from the market, and even the drug importation issue -- the public's vehement reaction, the media's coverage and comments, and the congressional response hit the top digits on the Richter scale.

At the Department of Health and Human Services, as well as at the FDA, we don't need to be reminded of the central role of medications in our people's health and sense of security. Neither does Secretary Thompson, who last May formed a department-wide task force to develop ideas on how to advance medical progress. He charged our group -- which includes the heads of NIH, CDC, CMS and NCI -- with promoting new technologies and strategies to stimulate innovation in health care. Among other goals, the task force -- which I have the honor to chair -- is asked to propose how to improve intra-departmental cooperation and remove bureaucratic hurdles to medical product development. We'll report on our work by the end of this year.

At the FDA, discarding red tape and exploring new ideas has been a routine endeavor for several years. Our agency is experiencing one of its great innovating periods: We're moving forward modernizing our rules, streamlining our procedures, and carrying out ground-breaking reforms. This is not a patchwork agenda: we're following a carefully thought-out plan for creating a new regulatory landscape.

The strategies we're putting to work are designed to deliver optimum health gains for each tax dollar while easing regulatory burden on industry and removing obstacles in the path to medical innovation. Most of these initiatives are not limited to health care products: they are agency-wide and systematic, and are extending novel regulatory approaches to all industries in the FDA's purview.

To give you a few examples, in the last couple of years, we've been upgrading and ensuring the quality of dietary supplements; we've improved the protection of patients from medical errors; we've put more health information on food packages; and we've strengthened the safeguards for the health of American livestock. We even took the initiative of developing a blueprint for confronting the epidemic of obesity.

But there is no arena where our new concepts have been bolder and more original than in the pharmaceutical sector. In this critical segment in our purview, we are changing the regulatory climate on a scale unmatched since the FDA's previous historic achievement, which was the establishment of standards for the world's best drugs and medical devices.

Today, we are preserving these standards while creating conditions conducive to drug development and production that are less prone to error, faster, and therefore less costly; and as such, we hope the result will be greater innovation and more new drugs available to patients.

You know as well as I why our drug development needs to be stimulated: it fails far too often. In the 1980s, the success rate for a new drug at the start of the development process was about 14 percent. Today it is about 8 percent. Approximately 50 percent of new drugs that reach the late stages of Phase 3 studies fail to produce adequate evidence of safety and effectiveness, and cannot be approved. The resulting losses in revenue are raising the cost of a new drug up to $1.7 billion, a staggering sum that severely affects the manufacturer's readiness to test new compounds for unmet medical needs.

This is particularly disappointing because of the high hopes raised by the scientific breakthroughs in the last decades of the last century and the greatly strengthened FDA performance that started with the passage of the Prescription Drug User Fee Act in 1992.

The sequencing of the human genome and the dramatic advances of genomics, proteomics, medical imaging and nanotechnology, combined with the user fee-supported acceleration of the FDA's product reviews, were expected to fill the R&D pipelines with scores of novel drugs and medical devices. That's not what happened, although the user fees have helped to reduce the FDA's review and approval times to an all-time low.

In the just-finished Fiscal Year 2004, our agency approved all major new products either within the demanding target dates of the Prescription Drug User Fee Act, or faster. For example, the median time to the approval of biologic license applications in FY 2004 was 14 months versus 15.6 months the year before, and the median time for the approval of priority new molecular entities was 6 months, the same as in FY 2003.

But while the performance of our review centers once again met the highest requirements, the number of novel product applications submitted to the FDA last year -- although somewhat higher than the year before -- did not substantially reverse a disturbing trend that had set in over the last decade. In the mid-1990s, the FDA's centers for drugs and biological products filed up to 44 applications for new molecular entities and 44 new biologic license applications a year. In the last fiscal year, the two centers received just 28 submissions for new molecular entities and 20 applications for new biologics.

A similar downward trend was reflected in the submissions for novel medical devices. Our center for these products received 51 submissions for original products in FY 2004, well below the 64, 67 and 71 applications it had filed respectively in 1999, 2000 and 2001.

In fact, the only medical products with a steady growth of applications in recent years have been generic drugs. Submissions for their approvals have shot up from 307 in 2001 to 563 in the last fiscal year. That's good news for our patients, because these products help bring down the cost of health care. But generics are not the novel drugs we hoped to get and need to treat Alzheimer's Disease, many cancers, diabetes, obesity and other serious chronic ailments.

At the FDA, in the last two years we've been addressing this very troubling shortcoming in a number of ways -- by working more closely with the drug sponsors, by scrapping and updating our regulations, and by producing guidances and designs for the development of new products. Above all, we've introduced new approaches for encouraging new drug development.

For example, we've launched a retrospective analysis of the root causes that prevent so many new pharmaceuticals from achieving approval on the FDA's first review cycle. This is a very costly problem that invariably results in a six-month or longer delay in the product's marketing.

Since last October, we've been conducting also two three-year pilot studies of how our scientists could best help drug sponsors to achieve early approvals for fast-track products. The trials are focused on the effect of early and ongoing FDA consultations with the drug sponsors on the quality of their applications.

And in the spring of this year, we introduced a program that's unique in the FDA's history. It is unprecedented in the boldness of its goal, which is to place the drug development process on a dramatically different, much more cost-efficient basis. And it is a ground-breaking shift in the agency's role, which is to stimulate and guide this unprecendented transformation by enlisting cooperation of industry, academia, and federal agencies.

I am referring to the so-called "Critical Path" project outlined in a white paper we issued in March. It is an undertaking through which the FDA, in effect, has accepted a share of responsibility for the development of novel drugs.

This initiative focuses on the basic reason for the decline of new drug development. There are some contributing factors known to all of us: for example, the enormous complexity of medications needed for the treatment of such chronic diseases as Alzheimer's and some types of cancer. In addition, the development of some novel drugs in recent years has been discontinued as part of corporate mergers and other business arrangements.

But after a study of this problem, our agency identified as the major shortcoming the lack of scientific insights that are essential for translating an experimental substance into a safe and effective health care product.

This is the crucial issue.

In the FDA's view, the state of the applied sciences that are used for medical product development lags behind the striking advances in the basic sciences that can make medical breakthroughs possible. As a result, the drug development process is obscured by uncertainties that frequently culminate in unexpected obstacles and project failures -- failures that could be avoided if the obstacles could be foreseen at the start of the development process.

The implied message in FDA's "Critical Path" report issued in March is that investment in basic research, while certainly necessary, is not enough to regenerate lagging drug innovation. The need is for greater investment in research that will yield scientific methods and standards to illuminate the product's way to FDA approval and the marketplace.

Specifically, what's lacking are new predictive tools -- including assays, standards, computer modeling techniques, biomarkers, and validated surrogate endpoints for use in clinical trials -- that would enable sponsors to separate promising candidates from probable failures early in the development process. By abandoning or redesigning the product before it enters costly clinical studies, sponsors could avoid great financial losses and increase the return on biomedical investment.

Our report calls for sophisticated development tools, especially in three critical areas: the product's safety, which now is explored through animal toxicology and in time-consuming, expensive, and sometime risky clinical trials; the product's medical effectiveness, which can be extremely difficult to prove; and the product's potential for reliable large-scale manufacture.

For example, by applying genomic and proteomic techniques, we can develop safety assessment programs for new biomaterials. With better scientific methods, we can design better computer and animal models, new biomarkers, and surrogate end-points for clinical safety and effectiveness.

We can improve standardization and automation of clinical research. We can develop novel and improved clinical trial designs and analytical methods for evaluation of safety and effectiveness that can reduce costs. We can also apply modern engineering and cutting-edge scientific knowledge to medical product manufacturing.

The public health benefits of such developments would be prodigious: Information provided by these tools would help physicians to identify patients who are likely to benefit from a medication, as well as those who are at risk for side effects.

Economic gains would be also great: for example, the use of predictive biomarkers could reduce the necessary size of clinical trials and facilitate the product approval process, thereby saving the sponsor millions. We estimate that a mere 10-percent improvement in predicting products' failures in clinical trials could reduce the development cost per drug by $100 million.

Creating such a predictive tool kit, of course, is a project of much greater magnitude than the FDA could carry out alone -- and, fortunately, that is not necessary. A considerable amount of work to strengthen basic and translational research is already being done at the National Institutes of Health and in the private sector. There are many academicians and companies that collect critical path data and establish their correlation.

No one, however, is assembling this information and formulating from it generalized principles that would guide faster and more accurate product development and evaluation. This is a crucial shortcoming -- but it is a deficiency that our agency is well equipped to remedy.

The FDA is uniquely qualified to provide this essential analysis and guidance because it has the most comprehensive information about the developmental hurdles that trip up new products. We also have the necessary expertise for setting research priorities and pursuing that research in cooperation with our stakeholders, while safeguarding confidential commercial information.

We are therefore in the best position to organize a nationwide program in which experts from government, academia, and the private sector can cooperate in designing a better pathway for developing new treatments. We're already hard at work on this project.

Since our "Critical Path" report came out, the FDA has been eliciting stakeholders' views on developmental issues. We are now preparing to post on the Internet a list of National Critical Path Opportunities that will identify the areas of product development that could benefit most from innovative approaches and emerging technologies. After the list is made public, we will then invite our partners to tackle the necessary research.

Incidentally, we are still looking for suggestions on how to best improve the predictability of product development. If you have any ideas to offer, please send them to us.

In addition to the hazards of the critical path, our agency submitted to the same rigorous analysis another set of problems encountered by the drug firms: those involving their manufacturing processes. This time, many of the obstacles to greater efficiencies could be traced to the pharmaceutical Good Manufacturing Practices, through which FDA makes sure that the therapies meet the highest standards for safety, effectiveness, and quality.

These requirements and practices had not been updated in nearly a quarter of a century, and while they did ensure the highest product standards, they were “out of sync” with new, efficient and cost-cutting quality control systems and manufacturing technologies. Moreover, the GMPs presented obstacles to adoption of these innovations by the drug manufacturers.

A little over two years ago, therefore, we set out to thoroughly modernize the industry's GMPs by overhauling more than a score of guidances, requirements, and internal practices to enable drug firms to switch to state-of-the-art manufacturing equipment and methods.

The new measures are all based on the principles of risk management, and are designed to control manufacturing hazards while removing red tape that's been rendered useless by modern technology.

A typical illustration of the direction this reform is an FDA policy guide that deals with the costly requirement for the validation of manufacturing processes for drugs before they're approved for marketing. Issued in March, this FDA document recognizes for the first time that advanced engineering principles and control technologies can eliminate the need for the production of multiple conformance batches to ensure that the drugs will be manufactured up to standards -- in other words, that in some cases one batch can be enough.

Another example is three draft guidances designed to improve the safety of especially risk-prone products -- drugs and biologicals (other than blood and blood components) that may require more than routine risk management. The guidances are entitled "Premarketing Risk Assessment," "Development and Use of Risk Minimization Action Plans," and "Good Pharmacovigilance Practices and Pharmacoepidemiologic Assessment".

The guidances are non-binding, their recommendations have a limited scope, and they do not impose a new burden or requirement on the manufacturers. Moreover, the suggested risk-reducing measures and tools are applicable only to a minority of products, because most drug risks are adequately managed by professional labeling, package inserts or in other routine ways.

But the guidances should be highly useful for firms whose products merit special risk management. The recommendations range from long-range, controlled safety studies to data mining to identify a linkage between a product and an adverse event; reminder systems to enhance reduced-risk prescribing and use; and performance-linked access methods from the dispensing of drugs.

Particularly valuable, I believe, is the major proposed risk-minimization tool, called RiskMAP, which is designed to meet specific risk-mitigating goals without detracting from the benefits of the product. RiskMAP is a strategic safety program suggested for such products as, for example, Schedule II controlled substances, whose benefits are important but are associated with serious risks. It can be also highly useful in helping prevent serious adverse events and/or increase the probability of important drug benefits.

Another aspect of our regulatory work that's being reorganized on the basis of risk-management principles is the agency's inspection system. For example, we're in the process of creating a pharmaceutical inspectorate, a first-of-its-kind, state-of-the-art program that will be staffed by a cadre of carefully selected experts specifically trained to inspect highly complex and high-risk drug facilities. We are currently developing curricula for the training of these specialists.

Yet another example of the agency-wide application of risk-based principles is several draft documents published earlier this year that provide guidance on the management of safety hazards that can arise throughout a product's entire lifecycle, including premarketing risk assessment; development and use of risk minimization plans; and good pharmacovigilance practices and pharmacoepidemiologic assessment.

The GMP overhaul is now practically completed except for several guidances and final rules that are being finished. The measures we've adopted are described in a recent report on the FDA Web page, and I commend it to your attention. Here are some of its highlights:

We're creating a Council on Pharmaceutical Quality that will be charged with policy development and continuing change management, including the ongoing implementation of certain quality management systems within the FDA related to pharmaceutical quality regulation;

We've issued a draft guidance on the role of quality systems in the pharmaceutical GMP regulations to ensure that agency practices encourage drug firms to adopt and adjust quality systems to their specific manufacturing environment.

We've taken a first step to replace the current chemistry, manufacturing and controls (CMC) review system with a new risk-based pharmaceutical quality assessment system that is being established in the Office of New Drug Chemistry in our Center for drugs.

We're implementing a revised charter by the Team Biologics Operations Group that adopts a quality systems management framework, improves processes for communication and coordination between headquarters and the district offices, and further integrates product specialists into the program.

We're implementing a pilot test of a new technical dispute resolution process for GMP disputes.

We've issued two final guidances: one that encourages adoption of modern science and risk-based approaches in aseptic processing in the manufacturing of sterile drugs; and another one, on Process Analytical Technology (PAT), which provides a framework for more flexible adoption of state-of-the-art technological advances in drug development, production, and quality.

We're preparing a final guidance on the use of computerized systems in clinical trials, and next year, we expect to publish a proposed rule amending Part 11, “Electronic Records, Electronic Signatures - Scope and Application.”

We're preparing to finalize a guidance on preparation and use of a comparability protocols for assessing chemistry, manufacturing and control changes to chemical entities, protein drug products and biological products.

We're collaborating with the International Conferences on Harmonization of Technical Requirements for human and veterinary drugs in developing a harmonized pharmaceutical quality system, and we've decided to join the Pharmaceutical Inspection Cooperation Scheme, whose purpose is to achieve worldwide implementation of harmonized GMPs and quality systems.

There are still more reform projects in the works, and we plan to announce some of them shortly. We're making particularly intensive efforts to modernize regulatory functions by using new information technology. For example, we've recently finalized a guidance that encourages adoption of the latest technological advances in maintaining electronic records and using electronic signatures.

We're also working closely with other government agencies, academia, and industry to develop standards for the electronic exchange of critical information, such as medical data and adverse events reports. The FDA has already adopted an annotated electrocardiogram wave-form data standard for the exchange of ECG data collected in clinical trials. And earlier this year we took another significant step forward by adopting the so-called Study Data Tabulation Model, a system designed to greatly speed up secure exchange of data from clinical trials in human drugs.

These electronic standards, which were developed by a consortium of pharmaceutical companies, will help automate the largely paper-based clinical trials research. We're planning to extend their use to include information on the study protocol, planned assessments and interventions, and statistical analysis plans. The system will also foster easier communication and collaboration among researchers, enhance data integration, and help reduce data management barriers to sharing the trial data.

Yet another key objective of this effort is to standardize the format for the voluminous and not always well-organized electronic submissions of investigational new drug applications, which have to be reviewed before drugs can be tested in clinical trials. By doing away with the need to laboriously rearrange the contents of the product submissions, we expect to achieve greater research efficiencies, easier data management, and lower costs.

While advancing this massive agenda, we've taken steps to encourage new drug ventures by facilitating the development of, and access to, critically needed medications. The most significant development of this sort was the creation of a joint National Cancer Institute-FDA task force to explore new ways for encouraging research on new technology for the prevention, diagnosis, and treatment of cancer.

One of our contributions to this vital cause is the streamlining of requirements for the studies of investigational new drugs. For example, a new FDA guidance published in January provides exemptions from a need of FDA's approval when using approved oncology drugs to conduct investigational studies. Our task force is also exploring the use of proteomics and imaging for biomarkers. In addition, we're in the process of clarifying clinical endpoints for myeloma and lung, colon, prostate, and breast cancers, and improving the use of bioinformatics in cancer drug development.

Yet another area where we're working closely with industry is developing and ensuring the supply of products to counter terrorism.

These projects include the identification of existing products that may be useful as medical countermeasures, and support for the availability of essential preventions and therapies for smallpox, botulinum toxin, anthrax, plague, nerve agents, ionizing radiation, and other potential threats. For example, we have developed a final rule for revised spore-former requirements that provides greater flexibility for manufacturers in producing biologic countermeasures.

All of these initiatives should yield significant public health benefits, and facilitate pharmaceutical progress.

I have discussed the various ways in which we at the FDA are working to reduce or manage the risks that hinder the development of new health care products. This is a worthy goal, not only for our government, the Secretary's drug innovation task force, and our agency, but also for the members of DIA. We're natural allies. I am therefore looking forward to working with you in the months ahead to advance research that will make more perfect our scientific know-how, our standards and our processes. Together, we can bring more safe and effective treatments from the lab to the market, where they can benefit our patients.